The Finance Ministry has pinned hopes on a good monsoon and effective policy measures to ease food inflation. It has simultaneously cautioned about global geopolitical situation that could adversely impact commodity prices.

Retail inflation based on Consumer Price decreased to 4.83 per cent in April from 4.85 per cent in March, the lowest rate in the past 11 months mainly on account of non-food products. During the same month, food inflation moved to 8.7 per cent from 8.5 per cent largely owing to vegetable prices.

According to Economic Affairs Department’s Monthly Economic Review released on Friday, price dynamics in essential food commodities over the past two months reveal that the moderation in prices has been broad-based in March and April 2024 except for seasonal uptick in some vegetables and persistent pressure in certain pulses. Among cereals, wheat price is expected to cool down by the current wheat procurement. Edible oils prices have continued to remain in a deflationary zone.

The report said the future inflation path will be shaped by a number of factors. Harvest for the rabi marketing season for 2024-25 is expected to temper the prices of key items like wheat and chana. Prediction of a normal Southwest monsoon also augers well for food production and easing of price pressures, the report said.

“The positive indications in the farm sector should help India firewall against any adverse pressures that may arise from geopolitical tensions and global commodity prices,” the report said. Further, it added that the strong macro-economic buffers should help real sectors of the economy, navigate the external headwinds smoothly and continue the growth momentum of the previous year.

Other sectors

About other segments of the economy, the report said that the industrial and service sectors are performing well, backed by brisk domestic demand and partially by tentative external demand. “Domestic manufacturing will likely receive stronger external support in the upcoming months,” it said, adding that modestly improved economic activity and consumer sentiment in Europe and a steady US economy have aided India’s exports in April.

There are reports that show that the number of organisations in the US and Europe that are focusing on reindustrialisation has increased. A majority of these organisations are focussing on enhancing supply chain resilience. “This can benefit India‘s manufacturing firms as part of the China Plus One strategy,” the report said. EXIM Bank of India has forecast that merchandise exports will post a double-digit growth in Q1 of FY25.

From the fiscal angle, according to the report, robust trends in capital spending of the government during April-February of FY24, combined with the fiscal consolidation plans reflected in the Budget for FY25, have laid to rest concerns about debt sustainability. “The major pillars of India’s macro-economic strength, including growth, price stability and fiscal management, are directionally positive and mutually reinforcing,” it said.

Listing the challenges, the report said the unrelenting geopolitical tensions and volatility in global commodity prices, especially of petroleum products, present substantial multi-frontal challenges. Nonetheless, “the expectation is that the macro-economic buffers nurtured and strengthened during the post-Covid management of the economy will help the Indian economy navigate these challenges reasonably smoothly,” the report said.